Someone should alert Robert Frank . (HT Craig Newmark of Newmark’s Door)
America offers foreigners more than just goods and services to buy. The U.S. economy, despite many imperfections, remains a vibrant, highly productive arena that also offers foreign investors and entrepreneurs an unusually rich array of promising investment opportunities.
To take advantage, foreigners need U.S. dollars. So when citizens of Germany, China, Australia and other countries want to invest in America, they cannot spend on U.S. exports all the dollars they earn when Americans import their goods and services. Foreigners accumulate dollars they invest in America by reducing their purchases of U.S. exports.
The dollars that foreigners don’t spend on U.S. exports are instead invested in America, which offers a vast open market, rule of law, honest courts and secure property and contract rights — attractive and durable institutions that are major elements of what America offers to foreigners.
So when foreigners invest their dollars in America (rather than spending those dollars buying our exports), we aren’t living beyond our means. Far from it. We are reaping the fruits of our relatively secure, entrepreneurial and free economy. The best part is that these foreign investments, by adding to U.S. capital stock, make our economy even more productive.
John Taylor celebrates the contributions of the late Allan Meltzer . (HT Jerry Jordan and Steve Pejovich)